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Presented By:xyz

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FIIAn institution that is a legal entity established or

incorporated outside India proposing to make investmentsin India only in securities.-SEBI

Types Of FII: -

Normal FII: Investment in equity & non equity instrument in the

ratio 70:30100% Debt FII: Invest in Government Securities or

Debentures/Bonds issued by an Indian Company

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Sensex V/S Rs-$ Exchange rate

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Lower InterestRate

Higher ExpectedEconomy Growth

Higher investment& consumption

Demand

Higher MoneySupply

Appreciating INR

Higher FII flow

FII flowsVirtuous Cycle

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Creation Of Liquidity

Lower Interest Rate

Higher Credit Off take

Higher Consumption

Rising Demand

INR Appreciates

RBI Buys USD

Conversion of

USD INR

By Bank

Wealth Effect, Higher

Assets Price

Higher Stock

Market Price

Higher FII Inflow

Higher Trade

Deficit

Capital AccountSurplus

Foreign Reserve

Accretion

Balance Of

Payment SurplusHigher Economy

Growth

FII & the financial system

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Benefits of FII flows

Increased capital availability

Increased liquidity in Stock market

Supplements domestic savings and investments

Increased forex reserves

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FII in INDIA

Foreign institutional investors (FIIs) have pumped

in Rs 20,117 crore (US$ 4.3 billion) into the

Indian equity markets in the month of May 2009

the highest in 19 months. Significantly, at US$ 1.04 trillion, India's market

capitalization (m-cap) has emerged as the ninth

largest in the world

SOURCE:- IBEF

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Growth Expected in India

To sustain the GDP growth of more than 8 percent, India requires an

investment of USD 1.5 trillion in the next five years

GDP USD 590 billion

GDP growth rate 9 %

Services contribution 54 %

FDI limit not 100 percent in majorindustry sectors such as Telecom,Semiconductors, Automobiles, etc.

Balance of Trade USD (-)46.2billion

Investment goal USD 250 billion

2006

GDP

USD 750 billion GDP growth rate 9.5%

Services contribution 60 %

FDI limit is expected to be close to100 percent in major industrysectors such as Telecom,Semiconductors, Automobiles, etc.

Balance of Trade

Shouldincrease with surging exports ascompared with imports

Investment goal USD 305 billion

2008

GDP USD 900 billion

GDP growth rate 9%

Services contribution 60-65 %

FDI limit is expected to be 100percent in major industry sectorssuch as Telecom,Semiconductors, Automobiles, etc.

Balance of Trade Should bepositive with increased level ofexports as compared with imports

Investment goal USD 370 billion

2010

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Issues & Problems

Problems of Inflation and Creation of Asset Bubbles,

Impact on Small Investors

Impact on Exports

Promotes short term investment than long term

Impact on Banking Institutions

Impact on Stock Market

Largest CreditConsumption cycle in India funded by FII flows

Real economy Impact-Currency, Interest rates, Bad Credit, Stock

Markets-Negative Wealth effects

Disorderly adjustments of imbalances-Financial Instability

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What can be done ?

Permit dollar settlements for FIIs

mitigate risks of currency fluctuations

improve the volume and liquidity of the derivatives market

Increase cap on G-Sec Bond Markets

Benefits of Global flows v/s the cost of instability.

Lock in Period Revise Normal FII Investment ratio

Participatory Notes- Actual Investor should come into picture

Option of converting Equity into Debt

Strong macro economic policy/reform framework

Strong regulatory framework, Corporate Governance

Strengthening the financial & banking system

Developing & deepening the currency & money markets

Allow INR to appreciate

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Thank You